Standing on the corner of East 50th street in Manhattan on a recent weekend, I was confronted by not one, but two empty taxi cabs. I pinched myself, turned around to make sure I was actually outside the Saks Fifth Avenue department shore and confirmed that it was indeed Saturday afternoon.

This five-second pause would ordinarily be enough of a lapse of focus to lose at least two cabs in this usually bustling section of New York's premier shopping district but instead, in a distinct sign of these depressed economic times, another pulled up to make a rare trio of empty cabs waiting outside Saks.

The driver of one of the cabs confirmed my fears and lamented the steep decline in shoppers on Fifth Avenue so far this year, and the lack of foreigners.

But the foreigners are staying at home and New York, the self-styled retail capital of the world, is hoping its homegrown army of shoppers will step in to help boost the takings.

However, those normally conspicuous consumers have also put away their wallets and are no longer coming to the shops in anything like their former numbers. One good reason for this is the reliance New York's luxury retailers have on a single section of the economy. More than 25 per cent of New York's wealth comes directly from Wall Street - and the trouble is, Wall Street is broke.

As for the remainder of the city's shopping classes - the millions of professionals who work in the media, law, IT, fashion, hospitality and the lower echelons of the financial services industry - they are gripped with the fear of losing their jobs, health insurance and financial future as the economy continues to slide. So it is no small wonder few of them are venturing out to buy a pair of Jimmy Choos.

This confluence of economic disasters is likely to change New York's retail landscape for good. And the big fancy department stores like Saks and Bloomingdales are first in line to fall.

It may seem fatuous to focus on the plight of New York's luxury retailers when there are so many quarters of the global economy in jeopardy, but it should not be forgotten that more than 70 per cent of the American economy relies upon consumer activity like shopping at stores such as Saks and, as the retailers go, so does the rest of the US economy.

What is more, these retailers sell for the highest prices goods manufactured all over the world. So it is that when America stops shopping, local economies from Beijing to Birmingham undoubtedly suffer.

The signs that America's best-known luxury retailers are failing have been brewing for some time, but the depth of the problems became all too apparent last week. Macy's, the biggest department-store group in the country, stunned Wall Street by announcing it would be laying off 7,000 employees - 4 per cent of the workforce. The giant retailer - which also owns Bloomingdales - could do nothing else to ease the pain of a 4.5 per cent sales drop in January alone. The quarterly numbers were even worse as sales for the last three months of the year were down a staggering 7.7 per cent, with sales for the full year off 5 per cent.

Down the road at Saks, things are just as bad. The sales floors are empty, revenue is sinking, the share price is slumping and would-be bargain hunters are waiting on the sidelines eager to snap up the big name group for a song.

Carlos Slim, South America's richest man, has been buying up shares in Saks and is said to be biding his time until the group has no choice but to give in to his overtures. His rapid stake-building has already triggered a poison-pill defence, put in place by the Saks board to see off potential hostile bidders.

Saks's latest trading numbers were so bad they make Macy's look ebullient. Sales in stores open at least a year tumbled 23 per cent in January, 15 per cent in the last quarter of the year, and more than 6 per cent for the year as a whole.

"Whichever way you look at it, this sector is an absolute train wreck," said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail advisory and investment banking outfit. "The luxury market is going to shrink tremendously all over the world. In the United States, the department store sector is also going to shrink. So, in New York these famous luxury stores are finished for a decade, at least."

Davidowitz says Macy's is in a particularly precarious position since it "doubled down" and merged with its rival May in 2005, just months before the consumer downturn began to emerge. "Macy's bought the Titanic in an already wrecked sector," he added.

Barneys, another New York stalwart, is also in hot water. It thought it had found an owner with pockets deep enough to see it through the downturn in 2007 when Istithmar, the investment arm of the Dubai government, shelled out $950m for the luxury store chain.

But Istithmar, which has been hit hard by slumping oil prices, the credit crunch and the global property downturn, is said to be hawking its retail jewel around town. Unfortunately for Istithmar, it too bought into the luxury retail market at the wrong time. Since its September 2007 purchase, sales at Barneys have slumped more than 40 per cent. As such, nobody is willing to come anywhere close to its reported $800m asking price.

The current scramble in Washington to formulate a $1 trillion economic stimulus package to help America's dying consumer economy is unlikely to do enough to save countless retail bankruptcies in the next year.

The National Retail Federation, an industry body, said recently that the stimulus package as it stands "does not do enough to immediately stimulate consumer spending, nor to preserve the tens of millions of jobs that consumer spending supports". Instead, the NRF wants a suspension of sales tax to get people back into the shops once more.

The reality is, however, that neither solution is likely to work while Americans are losing jobs at a rate of 500,000 a month and the country has one of the highest personal debt rates and lowest personal savings rates in the world.

"The American living standard will never be the same again," Davidowitz said. "And that means these luxury retailers have to change or die. This is the end of an era that has been a long time coming."